Aramco Slashes Asian Oil Prices to Six-Year Low Amid Shipping Cost Surge

Saudi Aramco has adjusted its oil prices for November, with a significant discount for Asian buyers and a price increase for European customers. For Asian markets, Aramco is offering Arab Light at a $5 per barrel discount to the Dubai/Oman benchmark, marking the lowest price in six years since June 2020. This cut follows a $3 per barrel reduction from October, according to Reuters.

In contrast, European buyers will see a $3 per barrel increase across all oil grades next month. Prices for U.S.-bound cargoes remain unchanged from October. Analysts had anticipated price hikes, but the deep discount for Asia appears to be a strategic response to rising shipping costs in the Hormuz route.

The discount for Asian buyers comes amid soaring freight costs due to Saudi Arabia's use of ship-to-ship transfers in the Gulf of Oman. These transfers aim to mitigate the risk of Iranian attacks on vessels carrying crude. The cost of transporting oil has surged, with the daily rate for a very large crude carrier (VLCC) reaching an all-time high of $1.3 million, up from $30,000 in January.

Freight costs now add $33 to the price of a barrel of oil shipped from the Persian Gulf, compared to $1.73 in January. This represents 27% of the delivered cost for a VLCC cargo, up from just 3% earlier this year, according to data from Poten & Partners.